The joint venture completes a Memorandum of Understanding which was signed in 2008 between Fiat and Sollers to create a project at the Naberezhnye Chelny factory, with production of the Fiat Linea sedan (above) slated to start this summer.

Fiat and Russian carmaker Sollers’ new joint venture is expected to create the second biggest automotive group in Russia after an investment of 2.4 billion euros (US$3.3 billion) and once it is fully up and running it will target building up to 500,000 cars per year with high levels of localisation.

The Russian government in an official statement has confirmed the new joint venture that will significantly step up a five year alliance between the two carmakers that already sees Fiat’s Doblò Panorama and Albea sedan built at the Naberezhnye Chelny factory in Tartarstan which will be the venue of the expanded project. The factory currently has the capacity to produce 80,000 units annually and also builds cars from other carmakers, but production of the Fiat models is only at present in small numbers. At the end of last year Sollers also opened a factory in the far East of Russia which will build the Fiat Ducato for use by state departments.

The joint venture completes a Memorandum of Understanding which was signed in 2008 between Fiat and Sollers to create a project at the Naberezhnye Chelny factory, with production of the Fiat Linea sedan slated to start this summer.

As well as the Albea, Doblò Panorama and Linea, six other Fiat and Chrysler Group models will be produced at the factory by the time the joint venture is fully up to speed in 2016. Fiat CEO Sergio Marchionne has also stated his desire to bring Jeep production to Russia and models from Chrysler Group brands' will become part of the mix. Localisation will be targeted at 50 percent, including engines and transmissions, with 10 percent of production destined for export.

"The realisation of this project will lead to a creation of a second largest player on the passenger car market in Russia," the Russian government said in a statement. Currently AvtoVAZ is the biggest player in the market, with Renault holding a stake. Fiat had been one of the unsuccessful bidders when a stake was offered in AvtoVAZ, however the dramatic slump in Russian car sales last year – they dropped by 50 percent on 2008 – means the French carmaker significantly overpaid. Fiat will be hoping to cash in on Russian state subsidies on new cars introduced last year in an effort to give its ailing domestic auto industry a boost and while the major European new car markets have either ended (Germany) or are winding down (Italy, UK) their incentive schemes, Russia is expected to continue their subsidies.